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Value versus Glamour

  • Jennifer Conrad

    (Kennan-Flagler Business School)

  • Michael Cooper

    (Krannert Graduate School of Management)

  • Gautam Kaul

    (University of Michigan Business School)

The fragility of the CAPM has led to a resurgence of research that frequently uses trading strategies based on sorting procedures to uncover relations between firm characteristics (such as "value" or "glamour") and equity returns. We examine the propensity of these strategies to generate statistically and economically significant profits due to our familiarity with the data. Under plausible assumptions, data snooping can account for up to 50 percent of the in-sample relations between firm characteristics and returns uncovered using single (one-way) sorts. The biases can be much larger if we simultaneously condition returns on two (or more) characteristics. Copyright (c) 2003 by the American Finance Association.

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Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 58 (2003)
Issue (Month): 5 (October)
Pages: 1969-1996

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Handle: RePEc:bla:jfinan:v:58:y:2003:i:5:p:1969-1996
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